Paying It Forward

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Student loan debt continues to rise, and with it concern among educators and politicians (including President Obama) and new federal policies aimed at reducing students' burden. One small private Christian college is expanding its own efforts, embracing a trick of the trade historically used by many law schools.

Huntington University, a liberal arts college in Indiana, is offering a loan reimbursement program that will pay students' federal and private loans if their annual salary after graduation is below $20,000; students will be covered on a proportional scale as their salaries increase up to $40,000.

As of this year, Huntington is the first institution to offer such a program to all of its incoming freshman and transfer students; most offer it only on a case-by-case basis. The approach is meant to entice students who choose a service-based career path after college and are afraid of facing unrealistic loan payments because of the generally higher tuitions at private institutions. At Huntington, about 400 students are enrolled in the program, with federal, private alternative and parent loans all covered.

The program is made possible through the Loan Repayment Assistance Program Association, a three-year-old company, which offers the same assistance to about a dozen other private colleges. The member institutions pay an average fee of $1,200 per student enrolled in the program.

At Huntington, a large number of students major in education, social work and ministry, all of which are generally low-paying fields, said Jeff Berggren, vice president of enrollment and marketing at Huntington. “From an investment standpoint, we thought it had more of a long-term benefit for our students,” Berggren said -- as compared to other price affordability tools, like scholarships.

Obama’s address last week highlighted the fact that there are 36 million students using federal student loans. And these loans have been seen as profit makers for the federal government, as it borrows the money it lends at a low rate and lends to students who repay it at a higher one.

Peter Samuelson, president of the LRAP Association, said he used the program himself years ago as a Yale law student. More than 140 law schools use some sort of reimbursement model for student loans.

Samuelson said it enabled him to go to Sudan and China after he finished his law degree to do human rights work.

“Student loan debt is a hot topic this year like it is every year,” he said. “Students have to borrow a lot to go to a private college. This gives you peace of mind. So I thought, why don’t we just make this available to undergraduate institutions?”

Samuelson said the program is a real draw for students and parents who may be on the fence about a college with a high price tag. “For them it’s a real solution to anxiety,” he said. “It does change where they go to college.”

Berggren said Huntington officials have seen that in the three years the college has used the program. After deciding to open up the program to all incoming students this year, the university surveyed its applicants and found that 80 percent of those who committed to the university indicated they also knew about the loan reimbursement program. Of students who were accepted but did not enroll, 30 percent indicated awareness of the program, Berggren said. The university’s tuition is about $30,000 per year, according to its website. About 90 percent of students receive some sort of financial aid, Berggren said, and the average discount rate is 37 percent.

“With Huntington’s situation, about three-quarters of our students borrow at some point, so this is pretty meaningful for a large part of our population,” he said.

Samuelson said the LRAP Association is currently focused on private institutions, but may branch out to other types, such as public or for-profit colleges, in the future.

Andrew Gillen, the research director at the Center for College Affordability and Productivity, said this program can certainly help some types of students and institutions. But it sparks some larger questions about college affordability and accessibility, he said.

Why don’t colleges just strive to keep tuition low rather than paying a fee to an outside company? he asks. “This seems like a Rube Goldberg way to lower college costs. We keep coming up with all these schemes to let tuition increase,” he said. “Why don’t we go to the ultimate source of the problem, which is higher tuition?”

“If we want to help college students, we should figure out how much we can help them and do it now,” he said. Gillen said it would seem logical to just lower tuition by the amount the institution is paying the company to reimburse student loans.

He also pointed out that for LRAP Association, students have to have graduated and be employed to utilize the services. That may make the program effective for law schools or small independent colleges where large proportions of students graduate, he said. “But once you start talking about public or for-profit universities, then you start getting into problems with graduation.”

At Huntington, Berggren said they have seen the program's positive effects. One business student in his senior year decided he wanted to use his degree to help others after graduation. He went on to accept a business position at a local organization that works with mentally and physically handicapped individuals. He certainly isn’t making the money he would have had he moved to Wall Street, Berggren said -- the loan repayment program made his choice feasible.